This invention relates to security systems for checks and the like and more particularly to a system that imprints upon the instrument a unique, computer-generated code based on data imprinted on the instrument. The same code can only be generated by a redeeming or clearing agency that has access to the same secret computer program. If the code imprinted on the check does not match the code generated by the computer at the redeeming agency, a fraudulent document has been detected.
In the current art, the issuing of large numbers of checks in a business operation are performed on a laser printer under computer control. A paper feed stock to the printer is provided with the account number imprinted with magnetic ink so that the character may be read by a magnetic reader or an optical character reader.
The check part of the blank sheet has a special background or border engraving that is difficult to copy and the check number and elements that appear on every check such as firm name, pay to the order, etc. are also pre-imprinted so that only the blanks, the date, payee, amount and signature are filled in by the printer to complete the check.
New developments in optical scanners and lasers now make it fairly simple and inexpensive to duplicate the special blanks, and laser printers with magnetic toner are available to reproduce the original stock account numbers. When a nicely counterfeited check is cashed by a bank clearing operation, the bank has been duly diligent, so the account holder is the loser. And the loss will come to light only after the accounts are reconciled.
As these scanners and printers become more sophisticated and available, the threat to the financial community becomes more and more serious, and may jeopardize the stability of many institutions while enriching the criminals who are in little danger themselves.
There is no way at present that the bank can recognize that a check is counterfeit if the appearance of the check, the account number, and the signature have been exactly copied by a high resolution scanner and printer. The bank has no way of authenticating the date, payee and amount.